GST in India covers tax slabs for goods and services, vital for businesses. This blog discusses the latest 2024 GST rates, sector-specific slabs, and the use of HSN/SAC codes for classification. Understanding these rates helps businesses manage tax liabilities, avoid penalties, and optimise pricing for compliance, while ensuring smoother financial operations and effective tax planning.
GST Slab in India
India’s GST system divides goods and services into five tax slabs to streamline classification and ensure appropriate taxation.
1. 0% GST
Applicable to essential goods and services, keeping them affordable.
Examples: Fresh vegetables, grains, and medical treatment.
2. 5% GST
Levied on non-luxury products and services.
Examples: Ready-to-eat meals, rail travel, and economy air tickets.
3. 12% GST
Covers intermediate goods and services.
Examples: Processed food items, office equipment, and certain industrial goods.
4. 18% GST
The standard rate applied to most goods and services.
Examples: Electronics, restaurant dining, and consumer goods.
5. 28% GST
Applicable to luxury goods and premium services.
Examples: Automobiles, high-end electronics, and premium hotel stays.
Importance of GST Rate Slabs:
- Fair Taxation: Lower rates for essentials and higher rates for luxury items
- Ease of Compliance: Clear categories help businesses apply correct rates
- Economic Balance: Supports fair pricing and sectoral growth
Proper application of GST rates ensures compliance, avoids penalties, and promotes a transparent tax structure.
Calculation of GST on Goods and Services
To calculate GST on goods and services, businesses need to consider whether the transaction is intra-state or inter-state:
- Selling Price Determination: Selling Price is the sum of the Cost Price and Profit Amount.
- Role of the Calculator: The calculator considers the Selling Price as the total value of goods or services subject to GST.
- GST Rate Variation: GST rates vary depending on the type of goods or services.
GST Rate Revisions Announced at the 55th GST Council Meeting
At the 55th GST Council meeting, several items and services underwent GST rate revisions. Key changes include:
- Rice Kernels: Revised GST rates applied.
- Gene Therapy: Changes in GST applicability for this advanced medical treatment.
- ACC Blocks: Adjusted GST rates for these construction materials.
- Bank/NBFC Penal Charges: GST revisions for penal charges on loan defaults.
Revised GST Rates
The GST Council introduced key revisions to GST rates impacting multiple sectors.
Major Changes in GST Rates
The Goods and Services Tax or GST rates of India for the Year 2024 have been effectively classified into five slabs comprising 0%, 5%, 12%, 18%, and 28% respectively. Knowledge of these rates is important for businesses to comply, while for consumers, it provides insights into the taxation of products and services.
Goods and Services with Reduced GST Rates
Lately, the following GST rates cut has been agreed to:
- ‘Disabled friendly’ automobiles (fitted with retrofitting kits): Tax reduced to 5%.
- Keytruda: Important cancer drug sales with GST rate of 5% only.
- Goods traded between India and Bangladesh: currently declared exempt from IGST.
Apart from that, these particular cuts are targeted at the availability of certain goods and services.
GST Rates for Goods and Services
This section outlines the GST rates applicable to various goods and services. It highlights specific categories like hotels, cars, electronics, and more.
| Category | GST Rate | Details |
|
Hotel Rooms
|
0% | Tariff less than ₹1,000 per night. |
| 12% | Tariff between ₹1,001 and ₹7,500 per night. | |
| 18% | Tariff above ₹7,500 per night. | |
|
Cars
|
18% | Electric vehicles to promote eco-friendly transportation. |
| 28% + Cess | SUVs, luxury sedans, and high-end vehicles. | |
| 28% | Petrol and diesel cars. | |
| 12% | Ambulances and purpose-built vehicles. | |
|
Gold and Diamond
|
3% | Applicable to gold-plated jewelry and gold bars. |
| 1.50% | Applicable to diamonds, including studded and loose diamonds. | |
|
Mobile Phones & Electronics
|
18% | Smartphones, laptops, tablets, and general electronics. |
| 28% | High-end electronics like luxury TVs and premium sound systems. | |
|
Medicines
|
0% | Life-saving drugs and critical treatment medications. |
| 5% | Basic healthcare essentials and over-the-counter (OTC) medications. | |
| 12% | Generic medicines and medical supplies. | |
|
Clothes & Textiles
|
0% | Fabrics costing less than ₹1,000. |
| 5% | Fabrics costing more than ₹1,000. | |
| 12% | Branded or designer clothing. | |
|
Food Items
|
0% | Fresh fruits, vegetables, unprocessed grains, fresh milk, curd, and unbranded bread. |
| 5% | Branded and packaged foods, dried fruits, nuts, packaged paneer, and lassi. | |
| 12% | Processed foods like fruit juices and preserved vegetables. | |
| 18% | Chocolates, confectioneries, ice creams, and instant food mixes. | |
|
Restaurant Services
|
5% | Standalone restaurants, takeaways, and those in hotels with room tariffs below ₹7,500 per day. |
| 18% | Restaurants in hotels with tariffs ₹7,500+ and outdoor catering or function/event services. |
Implications for Consumers and Businesses
- Consumers: Understanding these GST rates helps in anticipating the final billing amount when dining out or purchasing food items. For instance, dining in a standalone restaurant attracts a 5% GST, whereas dining in a luxury hotel restaurant may attract an 18% GST.
- Businesses: Restaurants and food service providers must apply the correct GST rates based on their establishment type and services offered. Compliance ensures proper tax collection and remittance, avoiding legal complications.
The outlined rates are meant to assist in providing a structure which encourages it’s compulsory application in the clothing and textile industry and its effects will be felt on the prices and the supply side of the industry.
GST Rates for Sector-Specific Categories
The GST rates applied to specific sectors like healthcare, real estate, and hospitality. Understand the impact of these specialized rates on businesses and consumers.
| Category | GST Rate | Details |
|
Healthcare Sector
|
0% | Primary healthcare services to minimize tax burden on essential treatments. |
| 5% | Important medical instruments to reduce costs of essential healthcare services. | |
| 12% | High-end hospital-based medical instruments to improve healthcare infrastructure. | |
|
Real Estate Sector
|
1% | Affordable housing projects to promote low-cost housing initiatives. |
| 5% | Under-construction properties to keep new housing and commercial property prices affordable. | |
| 0% | Completed properties for ready occupancy to ease the burden on buyers. |
How to Calculate GST Rates Using GST Calculator?
The following steps can be used for calculating GST:
- Step 1: Determine the GST amount of the item. GST Amount = Price x GST%
- Step 2: Determine the net price that is the cost of the product plus GST amount Net Price = Cost of the product + GST amount
For example:
Assume product price Rs. 100, GST is 18%,
Thus, GST Amount = 100 x 18% = Rs. 18
Net Price = 100 + 18 = Rs. 118
The following steps can be used for calculating the inverse of GST:
- Step 1: Consider GST inclusive price to be original cost consider Original Cost = GST Inclusive price − Original Cost x ( 100 100 + GST% )
- Step 2: Work out the net price as original cost less the GST amount Net Price = Original Cost − GST Amount
For example:
The price of the product including 18% GST is Rs. 118.
Therefore, Original Cost = 118 – [ 100 / 100 + 18 % ] = Rs. 100.
Using an Online GST Calculator
Under the unified GST system, taxpayers can easily determine the tax applicable on various goods and services. To calculate GST, it’s important to know the applicable GST rate for each category. The slabs of gst are 5%, 12%, 18%, and 28%.
For example, if a good or service is priced at Rs. 1,000 and the applicable GST rate is 18%, the calculation will be:
Net Price = 1,000 + (1,000 x 18%) = 1,000 + 180 = Rs. 1,180.
Manual Calculation of GST
The Goods and Services Tax (GST) can either form part of the price quoted or can be added/charged separately. It is also very important to be clear on whether the price is inclusive or exclusive of GST in order to apply the justified amount of tax. The subsequent computations and their corresponding calculations are all aimed at computing GST for each distinct scenario of the price that has been quoted.
GST Exclusive Price
When the price quoted does not include GST, use this formula to calculate the GST amount:
GST Amount = 100 Cost Amount × GST Rate Percentage
Example: If the cost of a product is ₹1,00,000 and the GST rate is 5%, then:
GST Amount =1001,00,000 × 5 = ₹5,000
Adding this to the original price:
Net Price = ₹1,00,000 + ₹5,000 = ₹1,05,000
GST Inclusive Price
When the price quoted includes GST, use the following formula to extract the GST amount:
GST Amount=GST Inclusive Price−[GST Inclusive Price×100+GST Percentage100]
Example: If the GST-inclusive price is ₹1,00,000 and the GST rate is 5%, the GST amount is:
GST Amount=1,00,000 − [1,00,000×100+5100] = 1,00,000 − 95,238 = ₹4,762
In this case, the original price before GST would be:
Original Price = ₹1,00,000 − ₹4,762 = ₹95,238
GST on MRP
To calculate GST on the Maximum Retail Price (MRP), simply replace the GST-inclusive price in the formula with the MRP. Ensure that the MRP includes the GST component before applying this method.
By understanding whether the price includes GST or not, you can easily calculate the correct tax amount and total price for any goods or services.
Why Knowing GST Rates is Important for Businesses?
Understanding the GST rates is essential for any business in order to comply with the tax policies, avoid incurring penalties as well as limit the losses due to improper pricing. Correct awareness of the GST rates helps in ascertaining tax liability which in turn helps manage the costs.
It also helps in claiming Input Tax Credits (ITC) which assists in minimising the overall tax costs. Therefore, knowing the GST rates is necessary to avoid disruptions in day-to-day activities and provide effective financial management.
Conclusion on GST Rates
GST rates in India are structured in different slabs including 5%, 12%, 18%, and 28%, depending on the goods and services in question. Certain sectors, such as healthcare, real estate, and hospitality have been earmarked for special rates to make the tax system more diverse. The recent changes made to these rates have some positive and straightforward objectives regarding the tax structure encouraging more tax compliance.
For businesses, staying informed about GST regulations is essential for seamless operations. Professional services can help the complexities of compliance and optimise your tax planning.
FAQs on GST Rates in India
What is the highest GST rate for goods and services in India?
The highest GST rate applicable to goods and services in India is 28%. This rate is levied on items like luxury cars, certain electronic goods, and high-end services.
Have GST rates changed for essential goods in 2024?
Yes, GST rates for essential goods have seen revisions in 2024. For example, certain cancer treatment drugs and retrofitting kits for disabled vehicles have experienced rate reductions.
How to use HSN/SAC codes to determine GST rates?
HSN (Harmonized System of Nomenclature) and SAC (Service Accounting Code) are used to classify goods and services under GST. By identifying the correct HSN/SAC code, you can easily determine the applicable GST rate for specific items or services.
Is there a separate GST rate for electric vehicles?
Yes, electric vehicles are subject to a reduced GST rate of 18%, making them more affordable compared to conventional vehicles that attract higher GST rates.
Are there exemptions for healthcare under GST?
Yes, certain healthcare services are exempt from GST. Basic healthcare services, such as consultations and treatments, are typically not subject to any GST, while medical devices and advanced treatments may attract a reduced rate.
